What do you mean by contingent?

A mortgage contingency is a clause stating that the sale of a home can only occur once certain conditions are met. Contingencies can vary, but they usually include a deadline or timeframe that defines when the conditions must be met. The typical contingency clause will detail when the buyer needs to get a mortgage by and what happens if the homebuyer cannot meet the terms. This usually means that the contract will be voided.mean by contingent

• What is a Mortgage Contingency?
• How Long Does a Mortgage Contingency Last?
• Should You Waive Your Mortgage Contingency?

What is a Mortgage Contingency?

A mortgage contingency is a clause written into a home sale agreement which can void the sale if certain conditions aren’t met. This clause is usually added to protect both the homebuyer and seller if the buyer is unable to secure mortgage financing. Mortgage contingencies also specify when an official approval for a mortgage needs to be in place. The date varies, but is usually a week before the anticipated closing date.

Homebuyers may receive preapproval for a mortgage when making an offer on a property. However, they cannot be fully approved until the mortgage lender verifies information from the borrower and details about the property. In most cases, buyers sign their home purchase agreement before getting mortgage approval.

If either party backs out of the purchase agreement before the buyer secures a mortgage, then there are no penalties. Thanks to the contingency clause, the buyer would recover the earnest money deposit with no obligation to purchase the home. Earnest money, also known as a good faith deposit, is money that the buyer presents to show that they're serious about purchasing the home. Buyers who back out after securing a home loan will lose their earnest money deposit, which is often held in an escrow account until closing.

Most mortgage contingency clauses also include lending terms, which set a specific dollar amount and the interest rate the buyer needs to get approval for. They should also state any loan closing fees that may be charged. Lending terms protect buyers, allowing them to back out of a sale agreement if they cannot secure a home loan or if interest rates and fees are too high.

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